Canyon Resources Ltd (ASX:CAY) has delivered a robust pre-feasibility study for the Minim Martap Bauxite Project in Cameroon, West Africa, that confirms the project’s potential to produce high-quality, low-contaminant bauxite over a long mine life of at least 20 years via a multi-stage development.
The PFS expands on Canyon’s scoping study in November 2019 and is underpinned by Minim Martap’s very high-grade, low silica bauxite resource, positioning the project as one of the highest quality bauxite deposits globally and providing diversification away from concentrated Guinea supply.
It is expected that the PFS will enhance strategic partnerships and offtake agreement discussions that are underway with potential to accelerate the development timeline.
“Long mine life”
Canyon managing director Phillip Gallagher said: “The PFS outlines a fast-track to production at Minim Martap and underlines the project’s potential to supply strategic project partners with high-quality bauxite over a long mine life.
“Interest in the project and demand for our product has been very encouraging and delivery of the PFS will support more detailed discussions with a range of potential partners as we look to move forward with its development.”
The PFS is based on beginning mining at 4 million tonnes per annum before ramping up to 5 million tonnes in line with the rail axle load increase from 17 to 20 tonnes per axle, which is part of the ongoing rail upgrades under construction by the Cameroon Government.
Stage-1 provides a foundation of export through the Douala Port, which provides a faster route to market, with future upside underpinned by expansion potential via the larger tonnage stage-2 development through Kribi Deepwater Port.
PFS team at priority mining area.
“Further upside potential”
The PFS is underpinned by Minim Martap’s 2019 mineral resource estimate of 892 million tonnes at 45.1% aluminium oxide and 2.8% silicon dioxide at a cut-off grade of 35% aluminium oxide.
Canyon director of projects James Durrant said: “The PFS defines a technically and commercially robust project which offers definition of a long-term, exceptionally high-grade bauxite product mined from Minim Martap.
“The consistent high quality of the bauxite mined offsets the cost of rail haulage, supports efficient refining by the end-user and sets the platform for further upside potential in resource expansion and product development.”
The PFS optimised the stage one operation to fit within the capability of Cameroon’s existing rail and port infrastructure, minimising the need for additional capex on infrastructure upgrades.
PFS headline economics are:
- Annual production rate of 5.05 million tonnes per annum;
- Project development capital of US$120 million;
- Average operating cost of US$35.1/tonne;
- Project NPV10 of US$291 million;
- Project IRR of 37%;
- Capital intensity of US$24/tonne;
- Payback period of 4.2 years;
- LOM Average Opex of US$35.1/tonne; and
- 2023 initial bauxite price of US$43.5/tonne increasing to an average of US$51.2/tonne over 20 years.
The seaborne bauxite market is dominated by China, which imports 100 million tonnes per annum, two-thirds of the global seaborne bauxite supply of 150 million tonnes.
About 50% of China’s imported bauxite is from Guinea and while China represents a potential offtake market, offtake and strategic partnership discussions have been developing with companies from outside China, including companies planning the construction of new alumina refineries.
As well as China, bulk offtake samples are being shipped to Europe and discussions are advancing with parties in the Middle East, SE Asia, Russia and North Africa with additional offtake samples planned to be sent in the coming weeks.
A maiden ore reserve estimate is expected to be released in the near term.
To achieve the range of outcomes indicated in the PFS, funding of in the order of US$119.6 million in direct project development capital will likely be required.
The company believes that there are reasonable grounds to assume that the project can be financed as envisaged in this announcement, on the following basis:
- The board and management have a strong track record in financing and developing resource projects;
- Various groups and potential strategic partners have expressed interest in development funding for the project;
- The assumed funding structure for the direct project development capital is 100% equity funded;
- The rail infrastructure and rolling stock cost is assumed to be financed through a typically structured owner-operated model with appropriate costs amortised and charged to the project on a unit rate basis;
- The PFS is expected to provide the basis for the maiden JORC ore reserve estimate for the project; and
- Canyon’s board believes that the funding requirements for the project are manageable (US$120 million) in relation to the company’s current market capitalisation of A$80-90 million.